Focus on Finance
Smart Tips for Investing in a Charity
Chances are, you already share your good fortune with others by volunteering and making financial gifts. But sometimes the act of giving can be time consuming and frustrating.
To ensure your time and money are spent wisely, we’ve assembled seven easy-to-remember tips, based both on our experience and on guidelines provided by the Council of Better Business Bureaus to help you make the most of your giving.
Create a budget. Few of us can afford to donate to every group that asks for help. Begin each year by developing a budget; then keep track of fundraising activities and designated recipients for the year. By being proactive, you maintain control of your giving, rather than simply reacting to the many requests you get each year. If your contributions are substantial, you may also want to consider making gifts by establishing your own charitable trust. Depending on the kind you create, you could arrange to have your interest income paid to a designated charity.
Help as a volunteer. There’s little that can match the satisfaction of contributing financially to a worthwhile cause-except perhaps contributing your time. By volunteering for the organizations you support, you’ll not only learn more about their programs and services, you’ll feel better too.
Ask questions. As a potential donor, you have a right to know what kinds of programs a charity operates, how much of your dollar is spent on these programs, and how much is spent on fundraising, executive salaries, and other administrative expenses. The quickest way to gather this data is to request a copy of a charity’s annual report, budget, audited financial statements, tax returns, and a list of board members. Charities are accustomed to providing this information every day.
Realize "tax-exempt" isn’t the same as "tax-deductible." Some organizations may say they’re "tax-exempt." That means they don’t have to pay taxes. If you wish to deduct your contributions on your federal income tax return, your donations must be made to nonprofit organizations the Internal Revenue Service considers charitable, educational, religious, scientific, or literary; those that prevent cruelty to animals; or those that foster amateur sports. In most cases, these groups have received 501(c)(3) status from the IRS. If you’re unsure about an organization’s tax status, ask for a copy of its Letter of Determination or contact your local IRS office.
Identify the groups you want to support. Take the time to think about what causes are most important to you. Sometimes it’s as simple as visiting a charity’s Web site or calling the organization to gather the information you need to decide whether you want to support it.
Take account of what percentage of your donation goes toward charitable purposes. The phrase "All proceeds go to charity"-though often used-is sometimes misleading. Ask how much of your contribution will go to the program you want to support and how much goes to pay the fundraisers.
Yield to sending cash. Instead, write a check made out in the charity’s name-not to the individual collecting the donation. Also, keep a record of your donations, noting the date and amount of the donation. Request a receipt and keep it, along with your canceled check and bank statement, for documentation at tax time.
You don’t need to be wealthy to help your favorite charity. In fact, there are many financial options available when it comes to donating to a charity. Your financial advisor can provide you with the support you need to help you make the most out of your charitable sharing. TPW
To ensure your time and money are spent wisely, we’ve assembled seven easy-to-remember tips, based both on our experience and on guidelines provided by the Council of Better Business Bureaus to help you make the most of your giving.
Create a budget. Few of us can afford to donate to every group that asks for help. Begin each year by developing a budget; then keep track of fundraising activities and designated recipients for the year. By being proactive, you maintain control of your giving, rather than simply reacting to the many requests you get each year. If your contributions are substantial, you may also want to consider making gifts by establishing your own charitable trust. Depending on the kind you create, you could arrange to have your interest income paid to a designated charity.
Help as a volunteer. There’s little that can match the satisfaction of contributing financially to a worthwhile cause-except perhaps contributing your time. By volunteering for the organizations you support, you’ll not only learn more about their programs and services, you’ll feel better too.
Ask questions. As a potential donor, you have a right to know what kinds of programs a charity operates, how much of your dollar is spent on these programs, and how much is spent on fundraising, executive salaries, and other administrative expenses. The quickest way to gather this data is to request a copy of a charity’s annual report, budget, audited financial statements, tax returns, and a list of board members. Charities are accustomed to providing this information every day.
Realize "tax-exempt" isn’t the same as "tax-deductible." Some organizations may say they’re "tax-exempt." That means they don’t have to pay taxes. If you wish to deduct your contributions on your federal income tax return, your donations must be made to nonprofit organizations the Internal Revenue Service considers charitable, educational, religious, scientific, or literary; those that prevent cruelty to animals; or those that foster amateur sports. In most cases, these groups have received 501(c)(3) status from the IRS. If you’re unsure about an organization’s tax status, ask for a copy of its Letter of Determination or contact your local IRS office.
Identify the groups you want to support. Take the time to think about what causes are most important to you. Sometimes it’s as simple as visiting a charity’s Web site or calling the organization to gather the information you need to decide whether you want to support it.
Take account of what percentage of your donation goes toward charitable purposes. The phrase "All proceeds go to charity"-though often used-is sometimes misleading. Ask how much of your contribution will go to the program you want to support and how much goes to pay the fundraisers.
Yield to sending cash. Instead, write a check made out in the charity’s name-not to the individual collecting the donation. Also, keep a record of your donations, noting the date and amount of the donation. Request a receipt and keep it, along with your canceled check and bank statement, for documentation at tax time.
You don’t need to be wealthy to help your favorite charity. In fact, there are many financial options available when it comes to donating to a charity. Your financial advisor can provide you with the support you need to help you make the most out of your charitable sharing. TPW